March 2008

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Let's see, with today's raising of 1.35 billion in capital, and the existing market cap of $283 million, but existing shareholders share is only 5.5%, well, that would put Thornburg to a market cap of $5.1 billion.

And they have to pay 18% interest... Just how the heck do they manage that?

7

I don't know how Canadian stats would compare to US as the systems are fairly different, but Canada has a lot of highly education immigrants that are shut out of the job market for not having their credentials recognized in Canada. [more]

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Naked Captialism has a piece on hedge funds in London. Apparently London is hedge fund capital of the world, and they are having the most outlandish parties with all the money they've been paid for those short term paper profits.

There seems to be 300 point down days when these hedge funds blow up...

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Today there is more news about walking away from free trade by Hilary Clinton. That would probably be good for BC as free trade isn't so free. There is a requirement to sell energy even if Canadian energy needs grow to the point that we need the energy and in BC with Expo 86 population vastly out grew the rest of Canada. My understanding is that we have to sell the energy cheaper and then buy back any shortfalls in energy at a higher price. [more]

9

Somehow I missed Goldcorp's earnings last month. Goldcorp is one of the overpriced pigs I follow. I started following it because of the joint ownership in the Alumbrera mine with Northern Orion and Xstrata. I looked at NO in depth and I did not understand why it was going down when it appeared undervalued to me. So I decided to contrast it's valuation to another company to help me to see if I'd missed something. At the end of contrasting the two companies it seemed to me that NO was trading at about 5-10c on the dollar relative to Goldcorp. So, I've followed copper piggy ever since. [more]

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23

People have been rushing into financials just in time for the next series of down grades and cut earnings. Looking for bottoms in this kind of uncertainty seem highly risky. Of course, the traders will be out already... [more]

11

Someone else, Yves, has questioned this publicly first, however, with the way the stock market trading has been going, last week or the week before I was having a private conversation with a friend about how rigged the market had looked to me over a few days of trading. It seemed that in the very last couple minutes of trading there was a whole bunch of buying that changed the day from being an all day down day to a positive day. [more]

11

I was just going to have a quick look around before heading off to the NTW today, and what do I find, Ambrose Evans-Pritchard's article about a derivative chernobyl being averted by the fed's actions over that little Bear incident. [more]

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12

I am of the position that while long term China will probably have an increasing standard of living, or at least there will be a growing "middle class," short term China is going to go through a painful correction. I also find it highly unlikely that the masses will see much in the way of an increase in standard of living simply because there are too many people there and not enough of the essential resources, like water. [more]

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Seeing how lquadland10 completely spammed and polluted the entire MF blogsphere with the video from my last post and other videos there not much point in continuing leaving as my last post as it is now everywhere... [more]

8

Here's an interesting development, a fair housing group has filed a complaint about the legality of the fed bailing out an investment brokerage, which doesn't fall under the definition of a bank. Certainly what the fed is doing with the bail is preventing the market from correcting, which is obviously in the interest of anyone wanting to get into the housing market. [more]

14

The "rescue" of Bear Stearn is the type of thing that I've been expecting and, as I have stated a few times, is why I choose to be out of the market. If you check out the brokerage insurance quality it might leave something (like actual capital) to be desired. [more]

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Seems policy makers expected the financial crisis to be accounted for by now, and urge banks to quickly disclose losses. Seems to me that this will not happen because there are losses yet to be realised because of all the mortgage resets still coming and the lack of being able to predict how many will walk from mortgages and how far housing will fall. [more]

11

I am going to guess that decisions like Volkswagon to be looking to build a plant in the US is probably driven in part by shipping costs which are related to energy. Any bets that more of the bigger ticket items end up being produced closer to the markets in which they get sold? [more]

13

The post says that the CDOs are so poorly written, how to handle a default isn't clear. In the past month or two there was an example of one of these things where one company paid about $100k to insure $10 million and they lost in a legal battle for essentially a technical wording reason. They paid insurance that could never be collected on the debt they thought they were insuring with the way the contract was written.

I have had past experience reading many legal documents and contrasting them for what you would think they said and what they actually say and whether they are enforceable. I got this experience when I was working to get smoking out of public places in BC. I got all the existing by-laws that I could find at the time, and there were 30-40 municipalities that had some kind of by-law at the time, usually the you-can-smoke-in-this-half-of-the-room and damn the laws of physics.

I systematically broke these by-laws down and contrasted individual points onto a grid. I had about 40 different columns. I did this exercise in the 80s and it was one of my most important learning experiences and an enormous contributor to what gives me an edge in everything I read and analyse. It was as much work as I put into a semester of university. [more]

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When demographia came out with their 4th annual affordability study I couldn't help but notice Australia. I am highly of the opinion that the US is in big trouble because the average affordability index for the country got up to 3.9 in 2005, and it is currently at 3.6. [more]

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8

Bush signed a zero down payment initiative in Feb. 2004? And Americans voted him into office again. Americans have a president that passed negligent and incompetent lending practices into law and then they voted for him again...

Dumb...

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8

I am reading The Housing Bubble and I am finding a common theme, people who bought homes far ahead of the bubble, at affordable prices, are in trouble because of in increasing their borrowing. For example, there is a story of a couple who bought a condo 8 years ago for $160k and now they owe $294k. After 8 years of ownership you are supposed to owe less. [more]

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One thing I have to say about the political system, and capitalism it is nonsense to believe there is a free market system. What exists is gross manipulation of the political system by wealth to protect wealth at the expense of the masses. [more]

9

Back in January I posted Here Comes The Margin Squeeze. In the post I was commenting on analyst's earnings expectations having changed by about 20% and how the markets had already experienced declining earnings. [more]

4

What a shock, Ambac managed to raise $1.5 billion selling equity, but what a price, $6.75 per share is a mere 7% of the peak price of $96.10 earlier this year. It is 9% below today's closing price and it almost tripled the number of shares. [more]

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6

I am not sure if I posted about this. One of the problems in the whole oil and gas issue is the refining capacity. Refineries are a huge environmental headache to build and they are expensive. I haven't followed the whole issue that closely but it has been suggested that insufficient refining capacity is helping to keep prices high.[more]

10

When the Dow first hit 13,000, on its way to pass 14,000 (not the way down) surveys started showing up asking which would show up first Dow 12,000 or 14,000. At the time I was seeing the serious problems with the economy and never dreamed the Dow would hit 14,000, so I picked 12,000. [more]

9

This morning reading Naked Capitalism I notice he picks up much stronger a point from Robert Reich than I did when I first read Reich's piece yesterday, and a point strongly worth considering for economic analysis. [more]